Medicare Payments Unlikely to Keep Pace With Costs

4/22/2019 9:05 PM   

Medicare physician payment increases aren't likely to keep up with physicians' costs over the long run, which could eventually curtail beneficiaries' access to care, the Medicare trustees said in a report issued Monday.

"Certain features of current law may result in some challenges for the Medicare program," the trustees wrote. "Physician payment update amounts are specified for all years in the future, and these amounts do not vary based on underlying economic conditions, nor are they expected to keep pace with the average rate of physician cost increases. These rate updates could be an issue in years when levels of inflation are high and would be problematic when the cumulative gap between the price updates and physician costs becomes large."

In particular, the trustees note in a footnote on page 5 of their report, "Under MACRA, a significant one-time payment reduction is scheduled for most physicians in 2025. In addition, the law specifies physician payment rate updates of 0.75% or 0.25% annually thereafter for physicians in advanced APMs [alternative payment models] or MIPS [the Merit-Based Incentive Payment System], respectively. These updates are notably lower than the projected physician cost increases, which are assumed to average 2.2% per year in the long range."

Beneficiary Access Concerns

That discrepancy could result in access issues for beneficiaries, a senior administration official said Monday during a briefing with reporters. In addition to physician payment rates being inadequate, "the annual price updates for most categories of non-physician health services will be adjusted downward each year [based on the] growth in economy-wide productivity ... Should these price updates prove to be inadequate, beneficiaries' access to ... Medicare benefits will deteriorate over time" unless action is taken, the official said.

However, there isn't a firm definition of what would constitute an adequate physician payment rate, the official told MedPage Today during a question-and-answer session. "I think the concern is to the extent that ... [updates of] 0.25% or 0.75% do not keep up with the rate of [average annual growth in] physician costs, that ...wedge may not be an issue over 1 year or 2 years or 5 years, but over a long period of time such as a 75-year window, that difference grows to be quite substantial," the official said.

The trustees also projected that the Medicare health insurance (HI) trust fund will run dry in 2026 -- the same prediction they made last year.

In 2026, revenues dedicated to the HI trust fund will pay 89% of the program's costs, they said. That percentage will decline to 77% by 2046 and then will rise slowly to 83% in 2093, they said in their report summary, adding that "The health insurance fund again fails the test of short-range financial adequacy, as its trust fund ratio is already below 100% of annual costs, and is expected to decline continuously until reserve depletion in 2026."

The health insurance trust fund is one of two Medicare trust funds; it pays for Medicare Part A benefits, which include inpatient hospital services, skilled nursing and home health services following a hospital stay, and hospice services. The other trust fund is the supplementary medical insurance (SMI) trust fund, which pays for Part B-covered physician and outpatient services as well as Part D, Medicare's prescription drug coverage program.

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